Correlation Between Innometry and Daou Technology

Can any of the company-specific risk be diversified away by investing in both Innometry and Daou Technology at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Innometry and Daou Technology into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Innometry Co and Daou Technology, you can compare the effects of market volatilities on Innometry and Daou Technology and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Innometry with a short position of Daou Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Innometry and Daou Technology.

Diversification Opportunities for Innometry and Daou Technology

0.8

Correlation Coefficient

Innometry  Daou Technology

Very poor diversification

The 3 months correlation between Innometry and Daou is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Innometry Co and Daou Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Daou Technology and Innometry is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Innometry Co are associated (or correlated) with Daou Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Daou Technology has no effect on the direction of Innometry i.e., Innometry and Daou Technology go up and down completely randomly.

Pair Corralation between Innometry and Daou Technology

Assuming the 90 days trading horizon Innometry Co is expected to generate 3.18 times more return on investment than Daou Technology. However, Innometry is 3.18 times more volatile than Daou Technology. It trades about 0.12 of its potential returns per unit of risk. Daou Technology is currently generating about 0.17 per unit of risk. If you would invest  717,000  in Innometry Co on December 30, 2024 and sell it today you would earn a total of  293,000  from holding Innometry Co or generate 40.86% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	100.0%
Values	Daily Returns

Innometry Co  vs.  Daou Technology

Innometry

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Innometry Co are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Innometry sustained solid returns over the last few months and may actually be approaching a breakup point.

Daou Technology

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Daou Technology are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Daou Technology sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Innometry and Daou Technology

The main advantage of trading using opposite Innometry and Daou Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Innometry position performs unexpectedly, Daou Technology can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Daou Technology will offset losses from the drop in Daou Technology's long position.

The idea behind Innometry Co and Daou Technology pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Stocks Directory module to find actively traded stocks across global markets.